Legislator looks to close 'loophole' on occupancy taxes

After being ignored on Beacon Hill for years, petitions from Cape Cod officials that they be allowed to charge an occupancy tax on private rental properties may finally be moving forward.

State Rep. Sarah Peake, D-Provincetown, called recent progress in the Joint Committee on Revenue a “giant baby step” forward in allowing towns to charge up to 11.7 percent room occupancy tax to people renting out second homes or condominiums by the day, week, or summer season. The same tax has been applied to hotels, motels and guest houses for years. But despite the booming business of home rentals by owners through Airbnb, HomeAway and VRBO, legislators have so far refused to consider the tax, Peake said.

“It’s very frustrating to me,” said Peake, who has confirmed with the state ethics commission that there is no conflict of interest in her sponsorship of the bill because she runs a guest house in Provincetown. “Closing this loophole would be tax relief for everyone.”

The two heads of the Joint Committee on Revenue have agreed in principle that temporary rentals of private properties should be taxed, she said. The committee members are now working on a bill that would apply the tax uniformly to all 351 towns and cities in Massachusetts at 5.7 percent, which would could bring in about $200 million in state revenue, Peake said.

Each town could then vote to opt into the program, and be allowed to charge up to 6 percent on top of the 5.7 percent going to the state.

Provincetown would gain $1 million or more in annual revenue, said town Finance Director Dan Hoort.

Eastham would bring in an estimated $800,000.

“That’s not a small number,” said Selectman Elizabeth Gawron, chairwoman of the Eastham board. “We would be able to do a lot with that.”

Not everyone is supportive of the proposed change.

Eastham real estate agent Bob Sheldon opposes the tax because it will most hurt the agents who handle rentals.

“They will have a real disadvantage compared to those who rent their own home and don’t report it,” he said.

In Brewster, which has the Ocean Edge Resort & Golf Club, with hundreds of privately owned condominiums, the tax would bring in $1 million a year, said Ed Lewis, Brewster's representative on the Barnstable County Assembly of Delegates and a member of the Nauset Regional School Committee.

Each year, renters of these properties benefit from public resources, proponents of the bill say.

“And the town gets zero,” Lewis said. "It's ridiculous."

Nearly every tourist-based state in the country charges the tax, including Florida and Hawaii, he said.

For about 12 years, Provincetown has been passing home rule petitions at town meetings urging the Legislature to approve the room occupancy tax, Peake said. Several other towns, including Truro, Wellfleet, Eastham, and Brewster, continue to bring forward similar petitions year after year at town meetings. But the bills go nowhere at the state level.

That’s because, until this legislative session, the chief policy makers, such as the Senate president, the speaker of the House, and the governor, have not recognized the enormity of the market, she said.

That has changed with the popularity of Airbnb and Uber, in which people can use their own vehicles to act as cab drivers without paying licensing fees or having inspections that taxi drivers must get, Peake said.

In addition, legislators have stalwartly opposed any new tax, she said.

“I’m trying to sell this not as a new tax, but as an update that reflects the rental market we have today,” she said.

The state Department of Revenue has put up a “tremendous amount of opposition” to a tax that would not be applied uniformly throughout the state, Peake said. A tax that would be collected by Provincetown but not by Stockbridge, for example, has been unpopular with department officials, she said.

The Joint Committee on Revenue’s bill aims to address that concern, Peake said.

“I don’t know if we can get it done in this session,” Peake said. “But I’m cautiously optimistic that if we can get it out of committee it can be ready for the next session.”

Gov. Charlie Baker has said he opposes new taxes on Massachusetts residents.

“The Baker-Polito administration is pleased to supply cities and towns with near record high levels of local aid funding for schools and local infrastructure two years in a row and the governor will review the bill should it reach his desk,” Brendan Moss, spokesman for the Executive Office for Administration and Finance, wrote in an email.